Minister David Willetts today told the House of Commons that Christian Brodie, chairman of the Student Loans Company, last week tendered his resignation over the scandal.

However the resignation was not accepted by business secretary Vince Cable, in part because Brodie had only recently joined the not-for-profit business, which is owned by the government.

"We are both clear that it would be unfair for Mr Brodie to take the blame for a practice that was nearly ten years old, particularly as he had only been Chairman since he joined in February of this year," Willetts told the House of Commons in a written statement.

Over 309,000 graduates who are in dispute over student debts have received threatening letters from what appears to be an independent debt collection agency called “Smith Lawson & Company Recovery Services”. But in reality the agency was merely a trading name of the Student Loans Company, with which is shares the same initials.

Willetts said he had not been aware of the practice before the BuzzFeed story but said the practice had been approved by the previous Labour government. He also said the Smith Lawson brand, which had been used since 2004, will cease to exist with immediate effect.

"No further use will be made of the Smith Lawson trading name," he said.

Former students who fall into arrears can now expect more straightforward dealings with the Student Loans company, with a pledge that all future communications must be "fair and transparent".

The Student Loans Company has also committed to reviewing its legal standing in the light of the scandal, in order to "with fully compliant with the spirit as well as the letter of consumer credit protection and financial services legislation".

"The company is now ensuring that its procedures and correspondence adopt the

high standards of customer service expected of it as a public sector organisation," Willetts said.

Jim Waterson is a politics editor for BuzzFeed News and is based in London.